This is an Election Year — Part 2

Vote election day in United States of America.

If you have not read Part 1 — Highlights under the Biden administration, click here. 

Part 2 — Under the Trump administration, there were two major tax reforms; Tax Cuts and Jobs Act (TCJA) Tax Reform (effective January 1, 2018) and ending in 2025. The estimated cost is $5 trillion. The Coronavirus Aid, Relief, and Economic Security (CARES) enacted March 27, 2020, a $2.2 trillion economic stimulus bill.

Note: On December 20, 2020, the CARES Act was reopened under the Biden administration and established several new programs for individuals and businesses (including various SBA loans). These business loans include a second draw PPP loan, Loans, Economic Injury Disaster Loans (EIDL), and Emergency Economic Injury Grants (EIDL Grants). The later loans had a low 3.75% interest rate, and loan payments were deferred for up to 24 months.  

Wins:

  • A TCJA created a flat tax rate for corporations and an additional 20% qualified business deduction for certain small business owners & independent contractors. This added deduction expires next year (2025). 
  • The CARES Act mitigated the impact of the pandemic on many households and businesses. A vast amount of assistance was distributed to businesses and individuals – including the forgiveness PPP loan, ERC payroll credit for retraining workers, weekly $600 pandemic checks, rent freeze, etc. 

Losses:

The losses are mainly related to TCJA and lack of oversight on certain payouts from the CARES Act — mainly from PPP and ERC pandemic assistance. As a result, there is widespread corruption in false claims and payouts, which, for some, backfired due to the inability to make the monthly payments for the unforgiving loans.

  •  Higher income tax for some individuals who generally have itemized expenses.  How so? The elimination and limitation of a vast number of expenses, such as job-related unreimbursed employee expenses for employees, and limiting the deduction of taxes paid to state, local, and property taxes, including state & local payroll taxes. (The limit is $10,000.) Home mortgage interest deduction was also limited.

 Note: the standard deduction increased to cushion the blow for some individuals.

  • Businesses and individuals took a blow with the elimination of any expenses related to activities considered lobbying, entertainment, amusement, or recreation. Why do these expenses matter? We are social creatures, and at times, we entertain others to build relationships and show our gratitude. Many business deals come about by sweetening the pot – you get the point.

A personal note: We know that the well-being of our human experience is so much more than the monetary stuff like taxes. Our well-being also lies in the way we care for one another. Whenever we exercise care toward the well-being of another person, we are inadvertently caring for our own well-being.

Before I close, I recall certain disciplines instilled in us as children. We were taught that each citizen has a responsibility to the other. In the Prime Minister’s State of the Union address in Jamaica on July 2nd, as Hurricane Beryl, a category 5 hurricane, posed a threat to the island, he expressed the need for climate control and our responsibility as individuals. 

“As a government, as a people, we must be resilient, we must build the capacity to absorb shock and recover quickly. If we bond together as a people, and each of us commit to act as responsible citizens – let’s do all we can to preserve life.”

In closing, as I come back to the soil of America — during this season, we (the nation of America) celebrate another year of independence — let us “not march back to what was but move to what shall be. A country that is bruised but whole, benevolent but bold, fierce and free. We will not be turned around or interrupted by intimidation because we know our inaction and inertia will be the inheritance of the next generation. Our blunders become their burdens.” (An excerpt from Amanda Gorman’s poem, The Hill We Climb.)

Let us resolve to be responsible citizens — as “we are striving to forge a union with purpose, to compose a country committed to all cultures, colors, characters, and conditions of man.” Furthermore, scripture reminds us that “everyone should look out not only for his own interests but also for the interests of others.”

Thank you for reading. I trust that something from this will resonate with you.

Don’t hesitate to contact me for a planning consultation to mitigate your tax liability, and to navigate and capitalize on the vast array of credits that are still available.

Nadine Riley, CPA
Founder, Masterpiece Accounting Group
Phone: (212) 966-9301
Email: info@mpagroupllc.com

The Masterpiece Accounting Group web, blogs, and articles are not rendering legal, accounting, or other professional advice. Tax strategies and techniques depend on your specific facts and circumstances. You should implement the information in this newsletter only with the advice of your tax and legal advisors.